Cuba: the effects of the return of capitalism

The debates on Cuba raise passionate controversies. It could not be different. The first successful socialist revolution in Latin America touched generations and reached huge achievements. But it also has gained powerful enemies. The imperialism has attacked it with rage and hatred.

Social relations, however, did not cease with the revolution. In line with the international process of restoration in all former workers’ states, capitalism has returned to the island. Just as it happened in the former USSR and China, the Cuban restoration did not come through foreign intervention, but through the bureaucratic caste located in the state’s apparatus. In Cuba, however, there was specificity: capitalism has come back through the hands of the same men who led the 1959 revolution. This fact sows misunderstandings and false hopes on the left worldwide.

Despite any illusions toward Castro leadership, capitalism thrives in Cuba. Foreign companies dominate the economy key sectors and advance into new sectors. There is no longer a state monopoly of foreign trade or the economy central planning. The massive layoff of civil servants is linked to the steep increase of the “self employed workers”, the small businesses and the cooperatives. The full employment, the high quality public health and education, in short, the Revolution’s social achievements have been dismantled one by one, in a permanent and painful process.

Even among the bourgeoisie, there are no doubts left about the capitalist restoration. The controversy, if any, is about the ongoing process directions of the Spanish, Canadian and Brazilian multinationals, celebrate the economic openness and demand an end to the economic blockade. On the other hand, the “gusanos” settled in Miami, with the U.S. backing want the repossession of their former properties. And it is only because of this demand that they keep the commercial blockade.

When the Pope Benedict XVI arrived in Cuba for a three-day visit, the newspaperMiami Herald, one of the “gusanos” media vehicles, which has no sympathy for the Cuban government, said the Pope would meet a “very different” Cuba and that Raul Castro “approved the further expansion of private economic activity that has occurred under the regime.” The tone was euphoric, which was highly predictable: the Pope was there to “bless” the restoration.

The oddest thing, however, is that faced with indisputable facts, the overwhelming majority of the world Left still consider Cuba a “socialist” country or a “worker’s state”. The truth is often unpleasant, but undeniable. The Cuban state defends and promotes capitalist property relationships. The whole reality shows it.

In this article, we will analyze the main data and the Cuban economy dynamics, as well as its new location on the labor international division. In the analysis of economic conditions, it will be highlighted the role of foreign investment and the intensive development of small businesses on the island. Throughout the text we will also discuss the role of the Cuban government as an agent of capitalist restoration. For this purpose we will demonstrate the main measures taken in recent years, especially in the last congress of the Communist Party. Finally, we will get to the resulting political backgrounds and to the possibilities contained within in the class struggle.

Unstable economy and neoliberal adjustment.

The Cuban economy navigates in stormy waters and leans on fragile grounds. The country’s GDP (Gross Domestic Product)has not recovered from the impacts of international crisis. In 2011 the national wealth grew just 2.7%. The island boasts a chronic fiscal deficit (- 3.6% in 2011) and a growing external debt ($ 24 billion), which represents 29% of GDP(2).

In this fragile context, the Cuban dictatorship imposes an agenda of “reforms” to the country. The definitions of the XI Congress of the Cuban Communist Party, held in April 2011, deepen capitalist restoration in the Island. For the sake of “updating of socialism in Cuba,” the government carries out a genuine package of “iniquities” against the people.

The main measures adopted are brutal, namely: a) comprehensive facilities available to open mixed capital companies and workers’ cooperatives b) liquidation of loss-making state companies; c) cuts in government subsidies in all areas. d) new management sharp change in both State companies and in the state apparatus; e) massive layoffs and termination of benefits, such as the soup kitchens, school transportation and especially the food stamp, a ration stamp or ration card issued by the government to allow the Cubans to obtain food or other commodities for free.

According to economist Jose Angel Jimenez, a researcher at the University of Havana, “if the changes proposed by the CCP are implemented it will be an unprecedented fact. Neither the reforms made following the end of the Soviet Union (in the 90s) were as comprehensive”(3)

The reform package seeks to enable the capitalist development on the island. The government wants to provide the country with the legal rules, economic safeguards and institutional architecture that will please the private investors. At the same time, it is decisive “shrinking” the state apparatus, particularly with regard to social security, education, health and public housing units. In a word: the Castro’s government has adopted a typical neoliberal adjustment.

The Dictatorship Fearsand the restoration effects.

Despite the Cuban government’s desire to promote the economy “takeoff”, the uncertainties are huge. The global crisis configures as a threat to the economic growth, which is highly dependent on tourism and foreign investment. From the political perspective, the uprisings and rebellions against dictatorships in the Arab world sound as a warning to Castro brothers. The international crisis combines with an internal unsteady setting of socioeconomic crisis and growing public dissent.

Cuba’s decline, as from the fall of the USSR and the capitalist restoration, was sharp and continuous. The GDP fell by almost 35% between 1989 and 1993, the fiscal deficit reached 33% of GDP in 1993, and the imports at current market prices fell 75% in those four years. Living standards have deteriorated sharply. For example, the Cuban population currently consumes 30% fewer calories and proteins.(4)

The slow economic recovery started in the 2000s, did not mean a resumption of the old standard of living. In fact the process intensified. To measure the Cuban social decline, it is sufficient to mention that the real value of wages in Cuba in 2011 represented only around 40% of the value measured in 1989(5). The average wage in Cuba is no more than $20.

The relocationof Cuba in the international division of labor.

The capitalist restoration is reconfiguring Cuba’s role in the international division of labor, turning the country even more submissive. The Cuban economy is currently even more backward and dependent than what it was at times of uneven relationship with the former Socialist Bloc.

Cuba economic structure shows a rapid growth in the service sector which rose from 49% to 76% of GDP in the last five years (it is worth noting the leading role of tourism). There was also a decline in the primary sector which fell from 22% to 5%, and the industrial sector, which fell from 29% to 19%. Exports grew at an annual rate of 3.5%, but imports rose by 6% over the past five years. The manufacturing, agriculture, civil construction and transport, together, do not reach 25% of the country

GDP (6). The chart below demonstrates this process:

Each sector – inbillions of dollars ($)

Source: Statistical Yearbook of Cuba.

Sugar production, historically the engine of the economy, has suffered a real collapse. Between 1985 and 2010, production experienced a drop of about 800%. The economic and social consequences were terrible. The reduction of revenues in foreign exchange fell by 3.5 billion dollars in 2010(7). The electricity supply has declined and unemployment in rural areas experienced a sharp rise.

In terms of food production, restoration impacts were not lower. In 1990, food exports exceeded by 600% on imports, but in 2009, the scenery are reversed: food imports overcome exports around 500%(8). In one sentence: Cuba lost its food sovereignty with the capitalism return.

It is also worth noticing, that the fall in food production was in line with the land privatization. To do so, a substantial part of the state farms turned into Basic Units of Cooperative Production (BUCP), reducing the state ownership participation in the farmable lands from 75% to 33%(9). Currently, new decisions have been taken in order to deliver the lands in a free of charge leasing to individuals and corporations.

Cuba new economic localization is not restricted to agriculture. A significant index to measure the development pattern of a country is the weight of the industry in the composition of the national wealth. As is well known, Cuba has never been a country with a significant industrial sector. Even after the revolution it remained primarily as an exporter of sugar. However, the return to capitalism has suppressed out what was the industry on the island. In order to visualize this downward trend, one has just to remember that the country’s industrial output in 2010 accounted for about 50% of the index measured in 1989. In short: the capitalism return has de-industrialized Cuba.

Source: ONE AEC, 2004, Table 11.1 and 2IX.1, and subsequent issues.

Foreign companiesin Cuba.

In 1995, the Cuban government took a qualitative step in the process of capitalist restoration. This year the Cuban leaders approved the ForeignInvestments Act, which allowed the control of the economy strategic sectors by foreign capital.
Unfortunately, the Cuban government does not detail the number of foreign investors or the “national capital” participationin business. However, with some data provided by the Spanish embassy in Cuba, it is possible to measure the breadth and depth of the ongoing process. In 2000 there were 392 associations with foreign companies whose capital came from 46 countries(10). After more than ten years, it is expected that this number has risen substantially.

According to the Spanish Embassy, more than 50% of the investment projects in Cuba are from the EU (European Union) countries, main investors: Spain (tourism, oil transportation, industry, financial services, water, cement) and Canada (tourism, energy and nickel) (11).

Investors from other countries have an increasing role, especially China, Venezuela and now Brazil. In 2007, Venezuela and Cuba signed 15 cooperation agreements that include a large number of joint ventures. Brazil has been taking up a larger space in recent years, especially in oil (Petrobrás), nickel and infrastructure (Odebrecht).

The Island has the most liberal foreign investment law in Latin America. Recently, the government announced that foreign investors now can own 100% of the enterprises. Companies can fully repatriate their profits without tax. In Brazil, the limit of repatriation is 27%. But that is not enough: the Cuban government has prohibited itself, legally, to expropriate property owned by foreigners in the country.
But there is another gloomy world of foreign companies in Cuba. In the island free trade unions are not allowed, as well as strikes and demonstrations. However, many Castro’s supporters argue “that we cannot allow workers’ strike against the socialist state, because it would help the ‘gusanos’”. We disagree with this argument, but let’s leave this controversial point aside for now. We want to ask about the workers’ status at foreign companies in Cuba; would they be allowed the right to fight against the multinationals exploitation and to carry out strikes for their salaries?

Unfortunately, the answer is “no”. As a matter of fact the laws are even tougher in this case. Cuba is a true “heaven” for foreign and mixed companies (in association with the new native bourgeoisie). Here are some rules of the sector: a) workers can only be hired through agencies set up by the state, b) investors pay the agencies in dollars, but state agencies pay the workers in Cuban pesos these state agencies are left with 95% of employee salaries, c) prior to being hired it is carried out a thorough political research about the worker interested in the job d) working hours ranges from 40 to 45 hours a week and occasionally more, e) it is prohibited to set up and organize unions and carry strikes out (12).

Within the Trotskyist left, many are the trends (such as PTS and the New MAS in Argentina), who still consider Cuba as a workers’ state even though “bureaucratic” or “in the process of restoration.” The gap between such assessment and the Cuban reality is increasingly blatant. If the program for Cuba is restricted to the tasks of a political revolution (the toppling of dictatorship and its replacement by democratic organizations of the working class), what should workers in power do in face of foreign and mixed properties dominating the basic branches of the economy? Plus, should they return to the foreign trade monopoly and to the economy overall planning? Admittedly, are not these tasks precisely the tasks of the socialist revolution? Unfortunately, the PTS and New MAS in Argentines prefer to continue fighting with reality.

The self-employed workers and the small businesses.

The Cuban government, pressured by the impacts of the global economic crisis, has set up a plan to encourage the private sector growth in order to drastically reduce the weight of the state sector and consequently the subsidies to the population and the social spending in retirement, health and education. A part of this plan was achieved in the Economic Reform (“lineamientos”) approved by the country’s parliament in 2010.

A fundamental goal contained in the Reform is the unbridled expansion of the self-employed workers, the small and the micro companies, and cooperatives. To lay the foundations for this unprecedented growth of private property, the Cuban government started the massive layoffs of state workers, which should reach 1 million dismissed employees by 2015. The new unemployed people, in turn, seek survival in small private businesses that multiply in geometrical proportions in the Island.

The number of permits issued by the government to small private businesses is expected to reach the breath taking figure of 380 thousand in 2012. The graph below shows the rapid growth of self-employment and small businesses:

Licenses issued (in thousands)

Source: Dr. Pavel Vidal Alejandro and Dr Omar Everleny Pérez Villanueva, Center for the Study of the Cuban Economy, University of Havana. (Centro de Estudios de la Economía Cubana, Universidad de La Habana).

To facilitate the expansion of private enterprise, government demands are quite flexible. Small businesses can freely employ the labor force, to establish banking and financial connections, rent and acquire private properties, among other facilities. Another finding that draws attention is the increasing number of workers connected to the universe of small businesses. Its growth is vertiginous: the government expected to reach 320 thousand workers in this sector by the end of 2011 (see chart below). And the process continued in an upward trend. The Central Bank of Cuba announced in August that the number of workers employed in the private sector reached 390,000 (13). The expectation is reported to reach 600 thousand licenses by the end of 2013. But that is not enough. The minister of economy of Cuba said that employment in the state sector dropped 7% in the first half of 2012, and announced a 35% increase of workers in the private sector or “self-employed.” (14) Also according to the minister, the outlook in the medium term is that the private sector meets to 40% of GDP.

Political perspectives

The capitalist development in the Island does not happen without contradictions and uncertainties. The Cuban government maneuvers through dangerous paths. The ailments inherent to capitalism and the dismantling of social achievements endanger the dictatorship, which fear that the Arab revolution winds come to the Island. It is no accident that, in a recent speech, Raul Castro attacked “oppositionists’ small groups” who aspire to “succeed herein one day something similar to what has happened in Libya” or “intend to do as in Syria.”

Far more than fearing the “gusanos” of Miami, the dictatorship trembles at a social uprising possibility. Speaking on behalf of “revolution and the socialist defense”, the Cuban government aims to keep social control as well as the sources of its material privileges. In fact, the Castros lead a kind of development similar to the “Chinese development.” In other words, a capitalist economy ruled by a Communist Party dictatorship.

For the Cuban dictatorship, however, it was not enough to have special privileges for its position in the state apparatus; it was also necessary to be the owner. In the course of the current capitalist restoration, the dictatorship bound itself to foreign enterprises, becoming a partner in large projects. At the same time, it has been promoting the expansion of private property (on a large scale) through the thousands of small capitalists businesses that are taking over the island.

Indeed, we are before a new Cuban proprietary class. The fear towards the possibility of popular mobilization, however, makes this class hide its business, not disclose its figures and assets. It is understandable, therefore, the whole “socialist” phraseology of the regime, which reminds the people all the time: “It was we who have done the revolution, we will not betray you, trust your commanders.” Paraphrasing Marx, the dictatorship seeks thereby to overwhelm the brains of people who are still living with the ghosts of the past.

The Cuban people, in turn, are dissatisfied, but have not exploded yet into a social uprising. But how long will last the apparent calm? The return of unemployment, miserable wages and relentless social achievements dismantling cast the question on how long will they be bearable? How long will the “socialist” government’s speech and its widespread mechanisms of repression be able to restrain the popular struggle? It is difficult also, to be precise regarding the pace and the evolution of the class struggle in Cuba. What is likely, however, is the intensification of social and political contradictions.

In this regard, the global economic crisis and the rise of struggles all over the world contribute to a setting of instability in Cuba. A new dive into the global recession will have harsh consequences for the battered economy of the Island. Politically, the revolutions that bring down the dictatorships in the Arab world and the struggles of European workers against the austerity plans may serve as an example to the Cuban masses. Simultaneously, the extent of the attacks on the social gains, the return of increasing unemployment and high prices, also contribute to raise the temperature in social relationships.

The best scenario for Dictatorship is linked to the prospect of sustainable economic growth and maintaining control over the mass movement. Consequently, it is essential to strengthen the repressive apparatus, the continuity of the “socialist” speech, an economic recovery in global terms and a massive foreign investment in the country that makes possible the government reforms.

In the outcomes of class struggle, however, will be the final word. The revolutionary organization, in turn, has the duty to build a revolutionary program for Cuba. This program must have as a strategy to make a new Socialist Revolution in Cuba. This revolutionary program must have as an immediate task the struggle for the Castros’ dictatorship fall and the struggle for broad democratic freedoms, which include the free trade union organization, the right of going on strike, the end of the single party system and the immediate dissolution of the repression apparatus. These tasks, in democratic ground, are an essential part of the new socialist revolution which Cuba is in need of.

Regarding the attacks on Cuban people social achievements, it is highly necessary to fight against the massive layoffs in the public sector and for the end of government subsidies. The demand for general increase in salaries must be raised in order to fight high prices and starvation that devastates the workers. The closure of state-owned enterprises and the investments-cutting in social areas should be rejected! Our motto is: down with neoliberal reform! All revolutionaries must fight in defense of the social achievements of Cuban people such as education and public health!

With regard to the transitional tasks, it is necessary to fight for the nationalization of foreign and mixed companies under workers control! To ensure that workers control the country’s path it is crucial the return of the state monopoly on foreign trade and the economy central planning! Workers have to control the paths of the country through their class’ organizations based on the workers’ democracy. The second socialist revolution in Cuba must also be at the service of the construction of the Latin American and the World revolution!

All these tasks can only be carried out by the Cuban people and workers’ independent organization and mobilization. Therefore, it is imperative to build a revolutionary Marxist organization in Cuba, i.e. a Trotskyist one, which raises the flag of the socialist program and organize in its ranks the proletariat and poor peasants’ vanguard.

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Who We Are

La Voz De Los Trabajadores/Workers' Voice is a revolutionary socialist organization. We are the sympathizing organization of the International Workers League (LIT-CI) in the United States. We formed in California in 2008 around the struggles of the immigrant working class & the fight for militant, democratic trade unions and other workers’ and people’s organizations that defend the principle of class independence.